Capital Gains Tax

scallysally

Hi please help, we are in a very awkward position! We own a third of our house, another third own by Mother in Law (who does not live with us) and final third owned by aunty. Aunty has passed, and left her share of the house to her direct family. 
 
Direct family have asked if we would like to buy the third, however due to our age and the payments on buying this third, this is NOT possible.

Therefore assume only option is to sale. Mother in law was leaving her third in her will to us when she passes, however if we do have to sell mother in law has said she will give us her third of the profits, which means we can hopefully buy something else. 

However if we sell, mother in law, is basically going to have to pay capital gain tax, on her share of the profit made on the sale of the house.  This is a massive loss our side to put towards our new house buy. It is going to easy be around 20k on capital gains tax. The house has been valued at £390k she bought this some years ago for around £25k so as you can imagine this is out of our control. 

If Mother in law signed over her third to us before we sell, assume when we sell which will no doubt be soon as there wanting there cut, then we will end up being charged for capital gain tax? 
My question is, how do we avoid if we can not handing over the capital gain tax? This was never bought as an investment property by my mother in law it was simply to help us get onto the property ladder, and was never our intention to have to sell. 

Any advice would be beneficial, i am worrying so much, we do have a daughter whom lives in the house who is under the age of 16. Any advice i would so much appreciate. 

BoGoF

Even if MIL signed over her third before you sell then she has 'disposed' of her share at the date of transfer and would become liable to CGT.

eskbanker

scallysally said:

This was never bought as an investment property by my mother in law it was simply to help us get onto the property ladder, and was never our intention to have to sell.

It sounds like MIL was badly advised if she didn't envisage CGT becoming an issue when splitting ownership three ways like that - was there a professional adviser involved who could either offer guidance again now, or potentially be held liable for poor advice previously?

[Deleted User]

The op states that the house was bought ‘some years ago’. Could this have been prior to 31st March 1982?

scallysally

The property was not bought before 1982. If i am honest we thought the third was going to be left to us when the aunt passed. We now know this is not the case but is leaving us with this problem of not being able to afford to buy the aunt out and also leaving my Mother in law with a big CGT. What if we transfer ownership from MIL to my husband via the land register and then it be gifted under PET? 

[Deleted User]

scallysally said:

The property was not bought before 1982. If i am honest we thought the third was going to be left to us when the aunt passed. We now know this is not the case but is leaving us with this problem of not being able to afford to buy the aunt out and also leaving my Mother in law with a big CGT. What if we transfer ownership from MIL to my husband via the land register and then it be gifted under PET? 

That still doesn’t get round the CGT issue. The gift to your husband is a disposal with the ‘proceeds’ being the value at that date. 

scallysally

Oh dear, we are in a mess.. Mother in law, is not wanting anything from this third as it was always and has been left for my husband in her will. MIL was also under the intention that the aunt third was to be left to my husband. We have invested a lot of money and time within our home over these years adding to the property increase as well. Maybe a refusal to sell may only be a way forward. As the only people gaining from this is not ourselves at the moment. 

Jeremy535897

I assume this property is your main residence? What are the heirs going to do when you tell them you can't afford to buy them out? They could force a sale, but only by going to court.

BoGoF

I'm afraid this is why the say don't mix family and property as it often doesn't end well.

It sounds like there must be a lot of equity in the property? Have you looked at equity release to get the 1/3rd share?

scallysally

Even releasing the equity the fact that my husband is in mid 50s and i work part time, you can see it is not really working in our favour for paying out more money. We approached the aunt various times to buy her third and was told not to worry, you will not be with out a home.. Not looking this way at the moment.. and yes the fact your right mixing property with family really does not end well. 

scallysally

Yes its our main home, we lived here for some years now. Adding to the value of the home at the same time, they can force a sale your right we have a child also in the property whom is 12 so assume the court take that into account. We would be without a home. I am unsure what the heirs will do with the profit assume just enjoy them at the expense of us loosing a home!